Pat McKeough responds to many personal questions about the best stocks to invest in and other topics on investment and the economy from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.
This week, one Inner Circle member in search of a U.S. stock asked us about one of the most iconic brands on the American market, Coca-Cola. Pat looks at the company’s penetration of international markets and its efforts to broaden its market with healthier products, while taking into account the increasing appeal of private-label beverages to price-conscious consumers.
Q: Hi Pat: I would like to purchase a U.S. stock. What do you think of the Coca-Cola Company? Regards.
A: The Coca-Cola Company (symbol KO on New York; www.coca-cola.com) is the world’s largest beverage maker. It distributes over 500 brands (including Coca-Cola, Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle) through bottlers around the world. International markets supply 60% of its sales.
In the three months ended December 31, 2012, Coke’s revenue rose 3.8%, to $11.5 billion from $11.0 billion a year earlier. Excluding one-time items, earnings per share rose 15.4%, to $0.45 from $0.39. Sales of non-carbonated drinks in North America, such as Powerade, helped counter lower demand in Europe in the latest quarter.
Coke holds cash of $13.5 billion, or $3.00 a share. Its $14.7-billion long-term debt is a low 8.7% of its $169.2-billion market cap.
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Coke aims for wider range of customers with health-conscious products
Coke is pushing up its sales in foreign markets such as China, India and Brazil, with their growing middle-class populations. In 2012, sales volumes rose 16% in India, 22% in Thailand, 8% in Russia and 4% in China over 2011.
Coke trades at 17.2 times this year’s forecast earnings of $2.20 a share. The stock yields 3.0%.
In the Inner Circle Q&A, Pat looks at whether Coca-Cola’s sales in foreign markets can offset rising competition from private-label drinks that appeal to price-conscious consumers. He also looks at whether the company can broaden its appeal to a wider range of customers by adding to its lineup of healthier products. He concludes with his clear buy-hold-sell advice on the stock.
COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members
For years the main story in soft drinks was the ‘Cola wars’ between Coke and Pepsi, until private-label beverages began to make serious inroads on the two giants. Do you believe private-label products could actually drive well-established consumer brands out of the market? Can you think of one famous brand that might be particularly threatened?
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